I took money out of my Roth IRA and I received a 1099 - why?

Question

The Roth IRA is supposed to be tax-free and I shouldn't be paying taxes on the amount I put into it, so why did I receive a 1099.

I am not even over 40 yrs old and I think I've had the Roth IRA for at least 5 years. But that doesn't matter from everything I've ever read or been told. The Roth IRA is totally different from the Traditional IRA. It's there to use if you need it. I only took out what I put into it, not what I earned. I will double check my statement again. I'm doing my own taxes on Turbo Tax. So far, whatever I've contributed in my Roth IRA hasn't ever affected my taxes (I could enter the info or not).

Oh, and it's a 1099-R. It shows the amount in box 1 (gross deductions) and nothing in any of the other boxes. Box 2b shows taxable amount not determined. Box 7 is marked with a J and that means "early distribution from a Roth IRA, no known exception (in most cases under age 59 1/2). I talked to my bank before I did this and they also told me it wouldn't be taxable. So, I'm really confused now.

Answer 1

The amount you put into the Roth comes out tax free...the earning are subject to tax and penalty. They have "Taxable amount not determined" so you can determine it on your own. For example, if you pulled out $2,000 after funding it with $1,900, the taxable amount is $100. You'll also owe a penalty on the $100. If you only pulled out $1,800 after funding it with $1,900, then there are no taxes or penalties.

Enter the amount from box 1 of the 1099-R on line 15A of the 1040, but only enter the taxable amount on line 15B.

Why the fiduciary (the banker) didn't know your basis (the amount you put into the Roth) is beyond me. Sounds like they are lazy. I wouldn't use them again.

Answer 2

Are you old enough to take the money out tax free?

It is my understanding that you are allowed to take out up to what you contributed from a Roth, without penalty. Earnings however will be taxed if you take them out prior to age 59 1/2.

On the 1099, does it say the withdrawal is taxable? The reason I asked is that I rolled over my IRA this last year, and did it properly so I wouldn't owe any taxes, however I still got a 1099. It shows I withdrew the money, but shows that the withdrawal was not taxable.

Answer 3

even if you held the Roth for over 5 years, if you take a distribution before age 59 1/2, the earnings are taxable AND youre subject to a 10% penalty. there are some exceptions to the penalty if you used the money towards medical expenses , first home purchase, etc.

check out this chart
http://www.rothira.com/disttax.htm

Answer 4

Are you 59 1/2 yet? Or are you 55, took early retirement and had the Roth in force for 5 or more years?

Answer 5

All retirement account distributions need to be reported on form 1099 whether they are taxable or not. If they are not taxable (such as your Roth distribution), your tax preparer will know whether and how to include it on your tax return so that you don't pay taxes on it again.

Answer 6

This should be a 1099-DIV form.
Look at box 1a. Ordinary dividends,which include any net short-term capital gains from a mutual fund,these gains are fully taxable.What you made on the Roth investments is in box 2a.
Your money doesn't just site in the bank or institution you chose,
they use it to make investments that make money for you and then Uncle Sam has to get his part but, the good thing is with the Roth you are not paying on the total capital gains as in other stocks.
I won't get rid of mine because they have been paying off really
good for me.
Keep on saving.